In a few words…

Although the FCC has enacted net neutrality regulations which have been upheld by a federal court, this issue is soon to be back under fire

New chairman of the FCC, Ajit Pai, is actively working to dismantle net neutrality, presenting a threat to the current structure of the internet

The financial industry must pay close attention since the effects of repealing net neutrality could be extremely costly

It’s been almost a year since net neutrality, the legal doctrine restricting broadband internet providers from blocking or slowing down the delivery of online content, has taken center stage in headline news, but odds are you will be hearing this term quite a lot in 2017.

With the Trump administration’s apparent mandate to undo any lasting impact of the previous administration, net neutrality – one of the most popular accomplishments of the Obama administration – is back in the hot seat, leaving many people and businesses anxious about the future of the internet.

Although large tech firms like Facebook and Google are the most vocal in their opposition to the threat of abolishing net neutrality, the financial industry stands to lose a considerable amount from its revocation as well. Because of this, it’s important to understand the issue inside and out so when it is inevitably threatened, the necessary action can be taken to defend it.

The History of Net Neutrality

Before we go into how it came to be, I feel it’s important to establish what exactly net neutrality is. Rather than elaborate on my initial definition, here is a video from the New York Times that perfectly explains the core principles of net neutrality.

Net neutrality is an issue that stretches all the way back to the early 2000’s, when the Federal Communications Commission (FCC) and the major cable/phone companies were still tussling over what this new-fangled “internet” thing actually was (spoiler alert, it was never a series of tubes). At the time, land lines were still a huge part of the business model for companies like Comcast and AT&T and they saw internet communications companies like Skype as a serious threat to their business.

Edward Whitacre, former CEO of SBC Communications (one of the companies formed by the breakup of the AT&T monopoly) said at the time,

“They don’t have any fiber out there. They don’t have any wires. They don’t have anything… They use my lines for free — and that’s bull. For a Google or a Yahoo! or a Vonage or anybody to expect to use these pipes for free is nuts!”

This sentiment was shared by every major internet provider at the time, but the FCC disagreed and laid out the groundwork for what would later become net neutrality.

In 2007, Comcast, in a challenge to the power and authority of FCC, began to block the website Bit Torrent, later denying it before it was proven in an investigation by the FCC. Comcast then appealed the penalty leveled by the FCC to the District Court of D.C. who sided with Comcast and put the FCC’s authority on regulating net neutrality into question.

Comcast choked Netflix’s internet speeds until the company complied in February, 2014.

No Time To Celebrate

Even after the major win for consumer rights and the internet at large in early 2016, there is already a storm on the horizon looking to rain on our digital parade.

President Donald Trump is said to oppose net neutrality based on this rather confusing Tweet from back in 2014:

But based on the puzzling assertions in this tweet, it’s difficult to tell where he really stands. What we should focus on instead is Mr. Trump’s pick for Chairman of the FCC, Ajit Pai, and his outspoken views against net neutrality and the FCC in general.

Mr. Pai is a former Verizon lawyer and, after being appointed FCC Chairman on January 23rd, got started by ending an ongoing FCC investigation into wireless carriers “free data” offerings. One such “free data” programs is a practice called “Zero-rating” which is defined by Mitchell Baker, Chairman of the Mozilla Foundation, as such:

“Zero-rating” as practiced today means two things: First, someone other than the ultimate consumer covers the cost of their data charges. Secondly, the parts of the Internet that are available for citizens to choose from is limited, and predetermined by those entities with financial power.”

This zero-rating practice is essentially a toe in the water of net neutrality that draws disturbing parallels to the previously mentioned incident back in 2007 when Comcast was caught blocking service from Bit Torrent, only this time it is purposely going unchecked.

According to the New York Times, Mr. Pai said he hasn’t yet decided on how he is going to approach the reclassification of broadband and the net neutrality rules due to the legal hurdles he will undoubtedly face. He could end up in a lengthy legal battle seeing as a federal court upheld the rules only last year.

Regardless of his strategy, one can be sure that Mr. Pai and his staff are actively working to dismantle the recently established net neutrality rules in favor of what we can only assume will be multi-tiered internet services labeled as “innovative”.

Net Neutrality and the Finance Industry

For an industry that spent $2.4 Trillion on IT in 2016, you better believe anything altering the current structure of the internet will have a monumental impact on the financial sector. The tiered pricing model, which is all but guaranteed to follow the retraction of net neutrality laws, would add billions more in expenses for financial firms which would either impact their bottom line or be passed onto the consumer.

With the constant flow of transaction data taking place in the finance industry worldwide, financial firms would be forced (much like Netflix in 2013) to purchase the most premium tier of internet service and essentially be at the whim of whatever pricing model the internet service providers decide is “innovative” that quarter.

Also, as mentioned before, the tech giants who are the most vocally supportive of net neutrality laws (Google, Facebook, Amazon, etc.) will certainly take a hit if these laws are weakened in any way which will negatively affect millions of tech investments.

On top of that, it’s often the case that the internet service provider in a given area isn’t competing with anyone, leaving the financial industry, and countless other industries, between a rock and a hard place.

All of this is extremely important to keep in mind whenever this issue once again rears its ugly head seeing as the finance industry almost missed its chance to weigh in on the issue when it was initially being debated. Keep an eye out in the near future because this is not the end of the fight for net neutrality and when it’s once again time to speak up, nobody can afford to sit on their hands and wait to see what happens.